Coffee Market Report
The respected U.S. Department of Agriculture Global Agricultural Network USDA have maintained their forecast for the production from the predominantly Robusta coffee producing nation of Indonesia for the current April 2023 to March 2024 coffee marketing year, to reach an overall 9,700,000 bags, or 18.14% lower than the previous coffee marketing year in April 2022 to March 2023, with production that is reported at 11,850,000 bags. The production figures for the April 2023 to March 2024 coffee year are forecast to be made up of 8,400,000 bags Robusta coffee, down 20% from the previous year and 1,300,000 bags Arabica Coffee, down 3.70% from the previous year. Of this new crop, the forecast is that Indonesia will export 35.02% less than the previous marketing year at a total of 5,000,000 bags of green coffee.
The estimated production for the 2023/2024 coffee year is somewhat lower than the average production of 11.75 million bags seen over the past three coffee years, which is reportedly due to unfavourable weather conditions experienced during the cherry development phase ahead of harvest. The yield per hectare in Indonesia is generally considered to be on the low side between 700 to 1,000 kg per hectare, whilst realised production versus estimates year on year from Indonesia can be challenging. There is a dominance of small plot smallholder farms across this island country, and the tendency of farmers is to store and use coffee as cash, in addition to the growing internal domestic consumption variable.
The Indonesian domestic coffee consumption has meanwhile, shown steady marginal growth during the April 2022 to March 2023 coffee year whereby it was reported by the USDA to have 0.43% increase year on year. This supported by the development of local roasting and value add industries, absorbing a percentage of local coffee production as well as assisted by permitted imports of other origin coffees. Domestic consumption in Indonesia is made up of a combination of local and imported soluble products as well as local and imported roast and ground coffee products and is forecast by the USDA to be in the region of 4,790,000 bags during the current 2023/2024 coffee marketing year, this 0.42% higher than the same period last year.
Today is Thanksgiving in the USA, which shall see the New York market closed for the day. Thus, one can expect little excitement for the London market trading solo for the day.
The Certified washed Arabica coffee stocks held against the New York exchange were seen to remain unchanged yesterday, to register these stocks at 290,734 bags, with 98.30% of these certified stocks being held in, Europe at a total of 285,806 bags and the remaining 1.70% being held in the USA at a total 4,928 Bags. Of this, a total 56,799 bags, or 19.54% of the coffees registered and stored in consumer country certified warehouses of the exchange, are Brazil washed arabica, and a further 72.65% of these certified coffees, originating from Honduras. There was a 17,625 bags increase to the number of bags pending grading to the exchange; to register 17,625 bags pending grading on the day.
The January 2024 to March 2024 contract arbitrage between the London and New York markets narrowed yesterday to register this at 54.97 Usc/Lb. This equates to 32.52% price discount for the London Robusta coffee.
It was a softer day on the commodity markets yesterday, as the US Dollar index strengthened by 0.3% against a basket of other currencies, in pre-holiday trade. A stronger US Dollar is seen to be a bearish factor for commodities traded in other currencies. The Coffee and Wheat markets ended the day on firmer note, while the Corn, Cocoa, Sugar, Soybean, Gold, Silver, Platinum and Palladium markets ended the day on a softer note. The day starts with the U.S. Dollar trading at 1.250 Sterling, at 1.090 the Euro and with the US Dollar buying 4.907 Brazil Real.
The New York and London markets started the day yesterday, trading to the north of par on firmer notes respectively. The markets attracted selling pressure early in the day, to trend lower and trade below par. Both markets found support to reverse the trend in the early morning session, this saw the markets attract buying support to track above par, for the remainder of the early morning session. As the afternoon progressed, both the London and New York markets continued to trade in firmer territory extended the gains for the day, under relatively thin volumes of trade. In latter day trade, both markets settled into a narrow range, New York continued to oscillate on a firmer note to settle on a modest firmer note at the close, while the London market followed suit, to maintain more than half of the earlier gains and settle on a likewise modest firmer note at the close.
The London market ended the day on a positive note with 71.74% of the earlier gains of the day intact, while the New York market ended the day on a likewise modest near to unchanged positive note with 28.57% of the earlier gains of the day intact. This modest firmer close for the markets, might indicate some degree of direction, albeit that the markets fell back from the earlier highs of the day, in what would be considered a relatively thin trade volume day, and with the London Robusta market trading solo for the day, one might think the market is due for a steady start to early trade today, as follows:
LONDON ROBUSTA US$/MT NEW YORK USC/LB.
JAN 2515 + 33 MAR 169.05 + 0.50
MAR 2439 + 18 MAY 167.95 + 0.25
MAY 2408 + 12 JUL 168.60 + 0.05
JUL 2376 + 9 SEP 169.65 Unch
SEP 2354 + 6 DEC 171.25 + 0.05
NOV 2342 + 4 MAR 173.20 + 0.10
JAN 2332 + 4 MAY 174.20 + 0.15
MAR 2325 + 12 JUL 175.05 + 0.15
